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DECREE No

DECREE No. 178/1999/ND-CP OF DECEMBER 29, 1999 ON CREDIT INSTITUTION�S LOAN SECURITY

THE GOVERNMENT

Pursuant to the September 30, 1992 Law on Organization of the Government;

Pursuant to December 12, 1997 Law No.02/1997/QH10 on Credit Institutions;

At the proposal of the Vietnam State Bank�s Governor,

DECREES:

Chapter I

GENERAL PROVISIONS

Article 1.- Regulation objects and application scope

1. This Decree prescribes the loan security in credit allocation in form of loan by credit institutions to borrowers according to the provisions of the Law on Credit Institutions.

2. The credit allocation in other forms by credit institutions according to the provisions of the Law on Credit Institution, if the parties agree on security measures, shall also comply with the provisions of this Decree, except otherwise provided for by law.

Article 2.- Interpretation of terms

Terms used in this Decree shall be construed as follows:

1. Loan security means the application of measures by credit institutions to ward off risks and create economic and legal basis for the recovery of loans already lent to customers.

2. Loans secured with property means the lending of capital by credit institutions thereby the borrowers� debt payment obligations are secured for implementation with the pledged or mortgaged properties, or properties formed from the loan capital of the borrowers, or guaranteed with the property of the third party.

3. Loan security property means the property of the borrowers, the property formed from the loan capital and the property used by the guarantor to secure the performance of debt-payment obligations towards the credit institutions.

4. Property formed from loan capital means the borrowers� property with its value having been created partly or wholly by the loan amounts borrowed from the credit institutions.

5. Loans secured with property formed from the loan capital means the use of property formed from loan capital by borrowers to secure the fulfillment of their obligation to repay such loan to the credit institutions.

6. Guarantee with the third party�s property means the third party (called the guarantor) commits with the lending credit institution to use the property under his/her/its ownership to fulfill the obligation of debt repayment for the borrower when the debt turns due but the borrower fails to perform or has performed improperly the debt repayment obligation.

7. The borrowers� financial capability means their capability regarding capital and property to ensure the constant operation and fulfill payment obligations.

8. Credit institutions mean the credit institutions established and operating under the Law on Credit Institutions.

9. Borrowers include legal persons, family households, cooperative groups, private enterprises and individuals, that meet all conditions for capital borrowing at credit institutions as prescribed by law.

10. Guarantee with trust of socio-political organizations means a measure to secure loans in cases where a loan is not secured with property, thereby the grassroots socio-political organizations guarantee with their trust for poor individuals and family households to borrow small sums of money at credit institutions for production, business and/or service activities.

11. The borrowers� obligations to pay debts to credit institutions shall cover loan (principal loan), loan interests, overdue debt fines and charges (if any) stated in the credit contracts under which the borrowers shall have to pay as prescribed by law.

Article 3.- Loan- securing measures

1. Measures of securing loans with property:

a) Pledge and mortgage of borrowers� property;

b) Guarantee with property of the third party;

c) Securing with property formed from loan capital.

2. Measures of securing loans in cases where loans are not secured with property:

a) Credit institutions take initiative in selecting borrowers to provide loans without property security;

b) State credit institutions may provide loans without security as designated by the Government;

c) Credit institutions provide poor individuals and family households with loans guaranteed with trust of socio-political organizations.

Article 4.- Loan- securing principles

1. Credit institutions have the right to opt for and decide loans secured with properties or non-secured loans according to the provisions of this Decree and take responsibility for their decisions. In cases where a State credit institution provides loans not secured with property under the Government�s designation, the loss incurred due to objective causes by such loans shall be handled by the Government.

2. Borrowers shall be selected by credit institutions for loans not secured with property; if the credit institutions detect breaches of commitments in the credit contracts by the borrowers during the process of using the loan capital, such credit institutions may apply measures of securing loans with properties or recover loans ahead of time.

3. Credit institutions may dispose of properties used as security for loans according to provisions of this Decree and provisions of relevant legislation in order to recover loans when the borrowers or the guarantors fail to perform and have improperly performed their debt repayment obligations as committed.

4. After the disposal of the properties used as security for loans, if the borrowers or the guarantors still fail to fulfill the debt repayment obligations, the borrowers or the guarantors shall have to continue performing their debt repayment obligations as committed.

Article 5.- Protecting the legitimate rights and interests of the parties

The State protects the legitimate rights and interests of the parties involved in loan security. No organization or individual is allowed to illegally intervene in loan security and the disposal of loan-securing properties of the parties.

Chapter II

LOANS SECURED WITH BORROWERS� PLEDGED OR MORTGAGED PROPERTIES OR GUARANTEED WITH THE THIRD PARTY�S PROPERTIES

Article 6.- Principles for loans to be secured with borrowers� pledged or mortgaged properties or guaranteed with the third party�s properties

1. Borrowers shall have to pledge or mortgage their properties or to be provided with property guaranty by the third party in order to ensure the fulfillment of their debt-repayment obligations towards credit institutions, except where they are provided with loans secured by properties formed from the loan capital or with loans not secured with properties under the provisions of this Decree.

2. Credit institutions and borrowers shall agree on the selection of applicable measures of security with the borrowers� pledged or mortgaged properties or guarantee with the third party�s property.

3. Credit institutions may choose qualified properties as security for their loans; and select the third party to provide property guarantee for the borrowers.

4. The guarantors may only make guaranty with property under their ownership. The credit institutions and the guarantors may agree on measures of pledging or mortgaging the guarantors� properties to secure the fulfillment of guarantee obligations.

If the guarantors are credit institutions, the guarantee shall comply with the provisions of the Law on Credit Institutions and the regulations of the Vietnam State Bank.

5. When mortgaging properties annexed to land, the borrowers shall have to mortgage the land use right value together with such properties, except otherwise provided for by law.

Article 7.- Conditions and procedures for making loan security with borrowers� pledged or mortgaged properties and loan guaranty with the third party�s property.

1. Properties, conditions for accepting pledged, mortgaged or guaranteed properties, the procedures for conclusion and performance of pledge contracts, mortgage contracts and guaranty contracts (hereafter referred to as security contract) and for security transaction registration shall comply with the provisions of legislation on security transactions. The security contracts shall be certified by the State Notary or the competent People�s Committees if the parties so agree, except otherwise provided for by law.

2. The mortgage of land use right shall comply with the provisions of land legislation.

3. The examination of the legality and conditions of the properties used as security for loans shall be carried out by the credit institutions.

Article 8.- Determination of value of loan-security property

1. The loan-security property must be valued at the time of signing the security contract; the determination of the property value at this time only serves as basis for determining the amounts to be lent by the credit institutions and shall not apply when disposing of the property to recover debts. The determination of the value of loan-security property must be made in a separate document attached to the security contract.

2. For loan-security property being not the land use right, the determination of its value shall be agreed by the parties, or made by the hired consultancy agencies and/or specialized agencies on the basis of the market prices at the time of determination, with reference to different prices such as the State�s set prices (if any), the purchase price, the remaining value on accounting books and other factors on prices.

3. The value of the mortgaged land used right is determined as follows:

a) For land assigned by the State to family house-holds and individuals for agricultural production, forestry, aquaculture or salt-making; the residential land, the special-use land, land which the economic organizations receive the right to use from other people or which is assigned by the State with the collection of land use levy and the land use levy or the money received for the transfer of the right to use is not provided by the State budget; the land which the family households and individuals receive the lawful land use right transferred from other people or which is assigned by the State with the collection of land use levy, the value of the mortgaged land use right is determined according to the land prices set by the People�s Committees of the provinces or centrally-run cities applicable at the time of mortgage;

b) For land leased by the State to family households and individuals for which the rents have been paid for the whole leasing term; land leased by the State to economic organizations for which the rents have been paid for the whole leasing terms, but not allocated by the State budget; land leased by the State to family households and individuals for which the rents have been paid for many years and the paid leasing duration still lasts for at least 5 years; and land leased by the State to economic organizations for which the rents have been paid for many years and the paid leasing duration still last for at least 5 years and such rents have not been allocated by the State budget, the value of the mortgaged land use right shall include the damage compensation money (if any) when the land is leased by the State and the rents already paid to the State after subtracting the amounts paid for the period during which the land was used;

c) For land leased by the State to foreign economic organizations and individuals, overseas Vietnamese investing in Vietnam under the Law on Foreign Investment in Vietnam, when the value of the right to use the land on which their own property have been built with their investment, the value of the mortgaged land use right is determined according to the rent amounts already paid to the State after subtracting the amount paid for the period during which the land was used;

d) For land assigned by the State to economic organizations without collecting land use levies, which is used for the purposes of agricultural production, forestry, aquaculture or salt-making; the land leased by the State to economic organizations, family households and individuals for which the rents have been paid every year or for many years while the paid leasing duration remains for less than 5 years, the value of the mortgaged property shall not include the land use right value;

e) Where the land use right value is mortgaged and the land lessee is entitled to rent exemption or reduction under the provisions of law, the value of the mortgaged land use right shall be calculated according to the land lease value before such exemption or reduction.

4. Where the land use right is mortgaged and such land is affixed with property, the value of the property used as loan security shall include the value of the land use right and the value of the property affixed to such land.

5. The value of pledged or mortgaged property is determined to include yields, benefits and the rights arising from such property if it is so agreed by the parties or provided for by law.

Where the mortgaged property is the entire real estate with annexes, the value of such annexes is also included in the value of the mortgaged property; if only part of the real estate with annexes is mortgaged, the value of the annexes shall be included in the value of the mortgaged property only when so agreed upon by the parties.

Article 9.- The scope of obligation performance security

1. The scope of obligation performance security is the borrowers� debt-repayment obligations towards credit institutions. The obligations to pay loan interests, overdue debt interests and charges (if any) do not fall into the scope of obligation performance security if the parties so agree.

2. The value of loan-security property must be higher than the value of secured obligation.

3. The debt-repayment obligation inscribed in the credit contracts may be secured by one or many properties; by one or many measures of security with properties, provided that the total value of all security properties must be higher than the value of secured obligations.

Article 10.- Lending levels against the value of loan-security properties

The credit institutions shall decide the lending levels within the limit of the value of the loan-security properties and the scope of obligation performance security already determined.

Article 11.- The scope of securing loans by properties

A property is used to secure one debt-repayment obligation at a credit institution; where the property is registered in terms of ownership right as prescribed by law, a property may secure the performance of many debt-repayment obligations at a credit institution provided that the value of the loan-security property must be higher than the total value of all secured obligations.

Article 12.- The custody of pledged and mortgaged properties and documents thereon

1. When pledging their properties, the borrowers shall have to hand the properties to the credit institutions for custody; if the properties have been registered in terms of ownership, the parties may negotiate to let the properties be kept by either the borrowers or the third party, but the credit institutions shall have to keep the originals of the property ownership certificates.

2. For pledged or mortgaged properties being transport means or fishing vessels which have registration certificates, the credit institutions shall keep the originals of the registration certificates while the means owners may use their copies certified by the State Notary and the credit institutions (the pledges or mortgagees) for the circulation of their means during the time of pledge or mortgage. The credit institutions shall make certification in a copy of the registration certificate only after it was already certified by the State Notary.

3. When properties are mortgaged, the mortgaged properties shall be kept by the borrower, except where the parties agree to assign them to the credit institutions or the third party for custody. If the mortgaged properties are those having the ownership right and the land use right registered, the credit institutions shall have to keep the originals of the property ownership certificates and the land use right certificates.

4. Where properties are pledged or mortgaged for pooled capital loans, the credit institutions participating in the capital pool shall nominate their representatives to manage the loan-security properties and the documents thereon.

Where a foreign credit institution, a joint-venture credit institution and a Vietnamese credit institution jointly provide pool capital loan for a project in Vietnam, if the loan-security property is the value of the land use right and the property affixed to land, the Vietnamese credit institution must be the representative managing the loan-security property and the papers thereon.

5. If the party which keeps the loan-security property and papers thereon let them lose or ruin, it shall be handled according to legislation on secured transactions.

Article 13.- Performance of property-secured obligations in case the borrowers and guarantors are divided, split, consolidated, merged, transformed or equitized enterprises

1. For borrowers and guarantors being divided, split, consolidated, merged, transformed or equitized enterprises under the provisions of law or decisions of the competent State bodies, if the enterprises are unable to pay their debts before the division, spitting, consolidation, merger, transformation or equitization, the enterprises formulated thereafter shall have to acknowledge the debts and fulfill the obligation to pay debts to the lending credit institutions.

2. Properties used as security for enterprises� debt-repayment obligations after the division, splitting, consolidation, merger, transformation or equitization shall be handled as follows:

a) For divided or split enterprises: If the loan-security properties are divisible, they shall be divided according to rates proportionate to the debt-repayment obligations of the enterprises when being divided or split up; if the properties cannot be divided in proportion to the debt-repayment obligations and the divided or split-up enterprises have not otherwise agreed on the security measures, the credit institutions may recover debts before the division or splitting;

b) For consolidated, merged, transformed or equitized enterprises: The properties used as security for the enterprises� debts before the consolidation, merger, transformation or equitization shall continue to be used as security for such debts of the new enterprises after the consolidation, merger, transformation or equitization.

3. Where enterprises are unable to apply measures as prescribed in Clause 2 of this Article, the credit institutions may dispose of the loan-security properties to recover debts before carrying out the division, splitting, consolidation, merger, transformation or equitization.

4. In all cases of transferring the obligations secured with properties as prescribed in Clause 2 of this Article, the credit institutions, the borrowers or the guarantors being enterprises after the division, splitting, consolidation, merger, transformation or equitization shall have to negotiate the re-signing of the security contracts.

Chapter III

LOANS SECURED WITH PROPERTIES FORMED FROM LOAN CAPITAL

Article 14.- Cases of application

The securing of loans with properties formed from loan capital shall be applied to the following cases:

1. The credit institutions provide medium-term and/or long-term loans to investment projects for development of production, business, services and life if the borrowers and the properties formed from the loan capital satisfy the conditions prescribed in Article 15 of this Decree.

2. The Government or the Prime Minister decides to assign credit institutions to provide loans to borrowers in some specific cases.

Article 15.- Conditions on borrowers and properties formed from loan capital

When credit institutions provide loans to clients under the provisions of Clause 1, Article 14 of this Decree, the borrowers and properties formulated from loan capital must satisfy the following conditions:

1. For the borrowers

a) Having enjoyed confidence of the credit institutions;

b) Having the financial capability to fulfill the debt-repayment obligations;

c) Having production, business and/or service development projects which are feasible and capable of repaying debts; or having projects or plans in service of daily life, which are feasible and compatible with the provisions of law;

d) Having the own capital amounts for their projects and the value of properties securing loans by pledge and/or mortgage measure being at least equal to 50% of the investment capital of the projects.

2. For the properties

a) Properties formed from loan capital and used as loan security must be determined in terms of their ownership right or given the right to use; their value, quantities and be allowed for transactions. If the properties are immoveables annexed to land, there must be the land use right certificates for the land plots on which the properties shall be formed and the procedures for investment and construction under the provisions of law must be completed;

b) For properties which, as prescribed by law, require the purchase of insurance, the borrowers shall have to commit to buy insurance for the whole loan term when the properties have been formed and put to use.

Article 16.- Forms and contents and procedures for the signing and performance of contracts on pledge or mortgage of properties formed from loan capital

1. The contracts on pledge or mortgage of properties formed from loan capital must be made in writing; may be written in the credit contracts or made in separate documents as agreed upon by the parties. When the formed properties are put into use, the parties shall have to make appendices of the contracts on pledge or mortgage of properties formed from the loan capital, clearly describing their characteristics and determining the value of the formed properties.

2. The contents and procedures for the signing and performance of the contracts on pledge or mortgage of properties formed from loan capital and the security transaction registration with regard to the security with the properties formed from loan capital shall comply with the provisions of legislation on security transaction. The contracts on pledge or mortgage of properties formed from loan capital shall be certified by the State Public Notary or the competent People�s Committees if so agreed by the parties, except otherwise provided for by law.

Article 17.- Rights and obligations of borrowers when loans being secured with properties formed from loan capital

1. The borrowers shall have the following rights:

a) To exploit the utility, enjoy yields and benefits from the properties, except where the yields and benefits also belong to loan-security properties.

b) To lease and/or lend the properties if it is so agreed with the lending credit institution.

2. The borrowers shall have the following obligations:

a) To hand over to the credit institutions the land use right certificates of the land plots where the properties being fixed assets shall be formed when signing the contracts on security with properties formed from the loan capital;

b) To notify the credit institutions of the forming process and status of the security properties, creating conditions for the credit institutions to inspect the loan-security properties;

c) For loan-security properties for which the ownership registration is required by law, before putting them to use, to register the property ownership and assign to the credit institutions for custody the originals of such property ownership certificates;

d) Not to sell, transfer, donate, give, contribute as capital to joint ventures or use properties formed from loan capital to secure the performance of other obligations when debts have not yet been paid up to the credit institutions, except where being permitted by the credit institutions to sell them in order to pay for such secured loans.

Article 18.- Rights and obligations of credit institutions accepting security with properties formed from loan capital

1. The credit institutions shall have the following rights:

a) To request the borrowers to inform of the tempo of forming the security property and changes in the loan-security properties;

b) To conduct inspections and request borrowers to supply information for the inspection and supervision of properties formed from the loan capital;

c) To recover loan debts ahead of time if detecting that the loan capitals have not been used for the formation of the properties as committed;

d) To dispose of the properties formed from loan capital in order to recover loan debts when the borrowers fail to perform or improperly perform their debt-repayment obligations.

2. The credit institutions shall have the following obligations:

a) To conduct evaluation and inspection in order to ensure that the borrowers and the properties formed from loan capital and used as loan security satisfy conditions prescribed in Article 15 of this Decree;

b) To return to the borrowers the land use right certificates and the property ownership certificates (if any) after the borrower fulfill their debt-repayment obligations.

Chapter IV

PROVIDING LOANS WITHOUT PROPERTY SECURITY

Section I. CREDIT INSTITUTIONS SELECT LOANS WITHOUT PROPERTY SECURITY

Article 19.- Case of application

Credit institutions may choose borrowers to provide loans without property security when providing short-term, medium-term and/or long-term loans for execution of development investment projects or plans for production, business, service and daily life to borrowers as prescribed in Articles 20 and 21 of this Decree.

Article 20.- Conditions on borrowers having no property security

1. The borrowers shall have to fully satisfy the following conditions:

a) Enjoying confidence of the lending credit institutions in the use of loan capital and the full and punctual payment of debts, both the principals and the interests;

b) Having investment projects or production, business and/or service plans, which are feasible and capable of repaying debts; or having projects or plans in service of daily life, which are feasible and compatible with the provisions of law;

c) Having financial capability to perform the debt-repayment obligations;

d) Committing to apply measures of security with properties at the request of the credit institutions if using loan capital in contravention of the commitment in the credit contracts; committing to repay debts ahead of time if failing to apply measures of security with properties as prescribed in this point.

2. For borrowers being enterprises, besides the provisions in Clause 1, this Article, their production and business yield profits for two consecutive years just before the time of loan consideration.

Article 21.- Limiting loans without property security

1. The credit institutions must not provide loans without property security for subjects prescribed in Clause 1, Article 78 of the Law on Credit Institutions.

2. The Vietnam State Bank shall stipulate the level of loan without property security for a credit institution in each period.

3. The credit institutions shall stipulate the maximum debit balance to be borrowed without property security by a borrower.

Section II. STATE CREDIT INSTITUTIONS PROVIDE NON-SECURITY LOANS UNDER THE GOVERNMENT�S DESIGNATION

Article 22.- Providing non-security loans under the Government�s designation

The State credit institutions provide non-security loans to borrowers for the execution of investment projects under the special economic programs, the key economic programs of the State and/or socio-economic programs and to a number of clients entitled to policies on preferential credits regarding the capital-borrowing conditions as prescribed in legal documents of the Government or the Prime Minister.

Article 23.- Responsibilities of the State credit institutions� which are permitted to provide non-security loans under the Government�s designation

1. To strictly comply with the regulations of the Government and the Prime Minister on designated loans and abide by the provisions of law in the process of loan consideration, inspection of the use of loan capital and recover debt loans, both the principals and the interests.

2. To separately monitor designated loans and report on the situation of loan capital use, debt recovery possibility, propose handling of losses in cases where debts are unable to be recovered according to the provisions in Clause 1, Article 25 of this Decree.

Article 24.- Responsibility of borrowers of non-security loans under the Government�s designation

1. To strictly comply with the commitments stated in the credit contracts.

2. To strictly comply with the stipulations of the Government or the Prime Minister on the use of loan capital with regard to designated loans.

3. To be answerable before law for the losses subjectively caused in the use of loan capital by themselves.

Article 25.- Handling losses of non-security loans designated by the Government

1. The Government shall handle losses incurred by State credit institutions in cases where the clients borrowed capital at designation cannot pay their debts ( principals and interests) due to the following causes:

a) Natural calamities, fires and other objective upheavals;

b) Borrowers being economic organizations which are dissolved under decisions of competent State bodies or declared bankrupt after they are handled according to the provisions of law but still unable to fully pay debts to the credit institutions;

c) Other causes as decided by the Prime Minister.

2. Quarterly, the State credit institutions designated by the Government or the Prime Minister to provide non-security loans shall synthesize the losses incurred due to the causes defined in Clause 1, this Article, and report them to the Vietnam State Bank Governor and the Finance Minister for further submission to the Prime Minister who shall decide measures to handle losses for the credit institutions.

Section III. TRUST GUARANTEE BY SOCIO-POLITICAL ORGANIZATIONS FOR POOR INDIVIDUALS AND FAMILY HOUSEHOLDS TO BORROW CAPITAL

Article 26.- Trust-guarantee by socio-political organizations

1. The grassroots socio-political organizations of the Vietnam Peasants� Association, the Vietnam Women�s Union, the Vietnam Labor Confederation, the Ho Chi Minh Communist Youth Union and the Vietnam War Veterans� Association may provide their trust guarantee for poor individuals and family households to borrow capital from credit institutions.

2. The guarantees are poor individuals or family households who are members of one of the socio-political organizations defined in Clause 1, this Article, when borrowing small sums of money at credit institutions for their production, business and/or service activities.

3. The maximum loan amount lent to each poor individual or family household trust-guaranteed by socio- political organizations shall be stipulated in each period by the Vietnam State Bank.

Article 27.- Forms of trust guarantee by socio-political organizations

The trust guarantee by grassroots socio-political organizations must be made in writing, clearly inscribing the following details: the amount to be borrowed, the borrowing purpose, the obligations of the borrowers, the lending credit institutions and the guaranteeing organizations.

Article 28.- Rights and obligations of the credit institutions which provide loans guaranteed with trust by socio-political organizations.

1. To request the guaranteeing organizations to coordinate with the credit organizations in inspecting the use of loan capital and urging the debt repayment.

2. To coordinate with the guaranteeing organizations in the provision of loans and the recovery of debts.

Article 29.- Rights and obligations of the trust-guaranteeing socio-political organizations

1. To assist, guide and create conditions for poor individuals and family households to borrow capital and use capital for the right purposes and with efficiency; to urge the full and punctual payment of debts to credit institutions.

2. To refuse to provide guarantee if deeming that poor individuals and family households are incapable of using loan capital for production, business and/or service activities and of paying debts to the credit institutions.

Article 30.- Obligations of poor individuals and family households guaranteed for capital borrowing

1. To use loan capital for the right purposes as committed.

2. To create favorable conditions for credit institutions and socio-political organizations to inspect the use of loan capital.

3. To pay debts (principals and interests) fully and on time to credit institutions.

Chapter V

DISPOSAL OF LOAN-SECURITY PROPERTIES TO RECOVER DEBTS WITH REGARD TO LOANS SECURED WITH PROPERTIES

Article 31.- The principles for disposal of loan-security properties to recover debts

The disposal of loan-security properties to recover debts with regard to loans secured with properties shall be effected according to the following principles:

1. When due, the borrowers or the guarantors fail to perform or improperly perform their obligations towards the credit institutions, such loan-security properties shall be disposed of to recover the debts.

2. The loan-security properties must be disposed of by modes agreed upon by the parties in the contracts; where the parties cannot handle them by the mutually agreed modes, the credit institutions shall be entitled to:

a) Sell or assign the pledged and/or mortgaged properties in order to recover debts;

b) Request the guarantors to fulfill their guaranteeing obligations; if the guarantors fail to perform or improperly perform their obligations, the guarantors� properties shall be disposed of for the performance of the guaranteeing obligations.

3. Credit institutions may transfer the right to recover debts and authorize the third party to handle the loan-security properties; for this case, the third party is also entitled to dispose of the loan-security properties to recover debts like the credit institutions.

4. Where a property is used to secure many debt-repayment obligations, if such property must be disposed of to fulfill an obligation to pay a due debt, the other debt-payment obligations, though not yet due, shall also be considered due and entitled to the disposal of the loan-security property for debt recovery.

5. Where the properties are disposed of according to agreement, it must be effected quickly and openly, ensuring the interests of all parties; if the properties are not disposed of due to the failure to reach agreement on the selling prices, the credit institutions are entitled to decide the selling prices in order to recover the loan debts.

6. Expenses arising in the disposal of the loan-security properties shall be paid by the borrowers or the guarantors. The proceeds from the disposal of loan-security properties, after subtracting the disposal expenses, shall be used to pay debts collected by the credit institutions according to the following order: the principals, the loan interests, overdue interests and other charges (if any). If the proceeds from the disposal of the loan-security properties are not enough for the fulfillment of the debt-repayment obligations, the borrowers or the guarantors shall have to continue performing their debt-repayment obligations as committed.

7. The competent State bodies shall have to create conditions for and support the parties in disposing of the loan-security properties in order to recover debts for the credit institutions.

8. The disposal of loan-security properties is a measure to recover debts, not the property trading activities of the credit institutions.

Article 32.- Cases where credit institutions may dispose of the loan-security properties to recover their debts.

1. After the time limit of 60 days from the time a debt turns due, the loan- securing property is yet disposed of as agreed upon.

2. The borrowers, who have to pay their debts ahead of time under the provisions of law, fail to perform or improperly perform their debt-repayment obligations.

3. The borrowers being economic organizations have been dissolved before the debts become due, the debt-repayment obligations, though undue, are also considered due, if the borrowers fail to pay their debts and dispose of the loan-security properties for debt repayment, the credit institutions are entitled to dispose of the properties to recover the debts.

4. The disposal of loan-security properties shall comply with the provisions in Clause 3, Article 13 of this Decree.

Article 33.- Modes of disposing of loan-security properties

1. Selling the loan-security properties.

2. The credit institutions take such loan-security properties to substitute the performance of secured obligations.

3. The credit institutions may directly receive money amounts or properties from the third party if the third party has the obligation to pay the money or properties to the borrowers or the guarantors.

Article 34.- Effecting the disposal of loan-security properties

1. The parties shall reach agreements on the implementation of mode of disposing of the loan-security properties as provided for in Article 33 of this Decree.

Where the parties agree to effect the mode of selling the loan-security properties, the party selling the properties may be the borrowers or the guarantors, the credit institutions, both that coordinate therein, the authorized third parties. The property selling party ties may directly sell them to purchasers or through the property auctioning centers or the property auctioning enterprises.

2. Where the credit institutions are entitled to dispose of the loan-security properties as prescribed in Article 32 of this Decree, the borrowers or the guarantors shall have to hand over the properties to the credit institutions for handling.

The credit institutions are entitled to dispose of the loan-security properties as follows:

a) Directly selling them to purchasers;

b) Authorizing the property auctioning centers or property auctioning enterprises to auction the properties according to the provisions of legislation on property auction;

c) Authorizing or transferring them to the organizations with property-trading function to sell them;

d) When the credit institutions take the loan-security properties to substitute for the debt- repayment obligations, the ownership over such property shall be transferred to the credit institutions;

e) Where the third party is obliged to return the money or property to the borrower or the guarantor, the credit institutions may directly receive the money amounts or properties from the third party.

3. Pending the disposal of the loan-security properties, the credit institutions may exploit and use the security properties. The proceeds from the exploitation and use of security properties, after being subtracted for necessary and reasonable expenses for such exploitation and use, shall be used for debt recovery.

4. In cases where there appear disputes between parties and legal actions are taken, the loan-security properties shall be handled according to the legally binding judgements of the courts or the decisions of the competent State bodies.

5. Where the borrowers and the guarantors are bankrupt enterprises, the loan security properties shall be handled according to law provisions on enterprise bankruptcy.

Article 35.- Responsibilities of competent State bodies in disposing of loan security properties to recover debts for credit institutions

1. Where the disposal of loan-security properties meets with difficulties due to both subjective and objective causes, the competent State bodies have the responsibility to create conditions and provide support when so requested by credit institutions.

2. The Ministry of Public Security shall guide the police office at all levels to apply measures to support the credit institutions in the disposal of properties when the borrowers and the guarantors fail to settle the loan security properties as agreed upon.

3. The People�s Committees of the provinces and centrally-run cities shall direct various branches and levels under their respective management to implement this Decree and take measures in support of the disposal of loan security properties in order to recover loan debts for credit institutions.

4. After the loan security properties have been disposed of the competent State bodies have the responsibility to effect the registration of the ownership over the properties, transfer the land use right to the property purchasers, the land use right transferees according to the provisions of law.

Chapter VI

COST-ACCOUNTING, REPORTING, INSPECTION, EXAMINATION AND HANDLING OF VIOLATIONS

Article 36.- Cost-accountancy accounting, reporting, inspection and examination

1. The credit institutions shall have to organize the cost accounting, implement the regime of information, statistical report on loans secured with properties and loans not secured with properties and the settlement of loan security properties according to the stipulations of the Vietnam State Bank.

2. The Vietnam State Bank shall have to organize the inspection and examination of the implementation of this Decree.

Article 37.- Handling of violations

1. Organizations and individuals that violate the provisions of this Decree shall, depending on the nature and seriousness of their violations, be sanctioned according to the provisions of law.

2. Organizations and individuals that violate security contracts, if causing damage, shall have to compensate for the damage according to the provisions of law; all contractual disputes shall be settled according to the provisions of law.

Chapter VII

IMPLEMENTATION PROVISIONS

Article 38.- Implementation effect

1. This Decree takes effect 15 days after its signing.

2. The provisions at Point 1, Section II of Resolution No.49/CP-m of May 6, 1997 of the Government on the State enterprises borrowing capital from the State commercial banks without mortgage and other previous stipulations on mortgage, pledge and security for bank loans cease to be effective.

3. The credit contracts stating the application of the measures of pledge, mortgage guarantee and lending without property security, which have been made before the effective date of this Decree, shall continue to be performed according to terms agreed upon by the parties and in conformity with law provisions by the time of signing the contracts until the borrowers pay up their debts to the lending credit institutions; particularly the settlement of loan security properties for the above-mentioned contracts shall comply with the provisions of this Decree.

Article 39.- Guidance and implementation responsibilities

1. The Vietnam State Bank shall have to guide the implementation of this Decree.

2. The Vietnam State Bank, the Ministry of Justice, the Ministry of Public Security, the Ministry of Finance and the General Land Administration shall coordinate with the concerned ministries and branches in promulgating circulars guiding the settlement of loan security properties so as to recover debts for the credit institutions.

3. The Ministry of Justice shall guide the public notary procedures, the Ministry of Public Security, the Ministry of Communications and Transport and the Ministry of Aquatic Resources shall guide the use of the copies of the certificates of registration of communications and transport means, fishing vessels for circulation of such means when they are pledged, mortgaged for capital borrowing at credit institutions.

4. The ministers, the heads of the ministerial- level agencies, the heads of the agencies attached to the Government, the presidents of the People�s Committees of the provinces and centrally-run cities shall have to implement this Decree.

On behalf of the Government

Prime Minister
PHAN VAN KHAI